60-Day Rollovers and Multiple Checks

We continuously get questions on 60-day rollovers. Many times those questions revolve around a client receiving more than one distribution or wanting to complete the 60-day rollover with more than one distribution. Here is what you need to know.

As a reminder, the one-rollover-per-year rule only applies to IRA-to-IRA 60-day rollovers and to Roth IRA-to-Roth IRA 60-day rollovers. For purposes of this rule, those accounts are combined. You cannot do both an IRA and a Roth IRA 60-day rollover in a 12-month period. The rule does not apply to distributions from employer plans which are also rollovers. Those distributions can be direct rollovers or 60-day rollovers according to the tax code but they are not subject to the one-rollover-per-year rule.

Individuals who receive multiple distributions from their IRA can generally roll over only one of the distributions as a 60-day rollover within a 12 month period. This is not a calendar year. The 12 month period starts on the date the individual receives the distribution from the IRA. If a 60-day rollover was completed at any time in the 12 months prior to the receipt of a distribution, the individual is not eligible to complete another 60-day rollover of IRA funds until the 12 month period has ended.

There is one exception to this part of the rule. If an individual receives more than one check, from the same IRA, on the same day, then all distributions can be rolled over. This could happen if a custodian issues a separate check for separate investments in one IRA. For example, you ask for a distribution of $100,000 from the IRA. Two investments will have to be liquidated. The custodian issues one check for the liquidation of investment 1 and issues a second check for the liquidation of investment 2. If both checks are issued on the same day, both checks would be eligible for a 60-day rollover, as long as no other 60-day rollover has been done in the past 12 months.

On the flip side of the 60-day rollover transaction, an individual can do as many deposits as they wish in order to complete a 60-day rollover. Sometimes the desire is to diversify investments or institutions holding those investments. A distribution of $100,000 can be broken up into 10 deposits of $10,000 each to 10 different IRA accounts or to the same IRA account. This is true of distributions from IRA/Roth IRA or employer plan distributions. For employer plan distributions, the one-rollover-per-year rule will not apply.

As a recap, generally only one IRA/Roth IRA distribution is eligible for a 60-day rollover but a distribution can be rolled over in multiple contributions.

What happens when a rollover is ineligible? The IRA/Roth IRA owner ends up with an excess contribution in the account. Excess contributions are subject to a penalty of 6% per year for every year that they remain in the account. As with most things IRA related, the rules are not that simple. Working with a knowledgeable professional can help to avoid the pitfalls involved with a “simple” 60-day rollover.